Did you get it in writing? Business attorneys probably ask clients some form of this question more often than any other. Conducting business over a handshake is an idealistic and romanticized concept that many people aspire to as a demonstration of their honesty and integrity. In reality, the question of whether informally conducting business will eventually lead to a dispute is a matter of “when,” not “if.” The question of whether this fact signals the moral decay of our society is a topic best left to ethicists and sociologists, who would probably find a way to blame lawyers.
The reasoning behind reducing deals and agreements to writing is not entirely based on avoiding being ripped off or cheated. Proper documentation benefits all parties in the transaction equally. People are not always clear about communicating expectations and desires. Assumptions are made based on prior experiences. Even with the best intentions, misunderstandings arise that can easily devolve into legal disputes.
Documenting agreements does not always have to be complicated, expensive, or even involve legal counsel. Sometimes “getting it in writing” does not even involve a “contract.” The principle can be applied to everyday business. It can be simple as sending a confirming email after a conversation outlining your understanding and expectations from the conversation. Written records like this go a long way towards preventing disputes and can be effective tools for resolving disputes informally or through legal process if they arise.
A written agreement is essential any time a significant amount of money, time or materials is involved. In fact, the law requires certain types of agreements to be put in writing in order to be enforceable, such as agreements for the purchase of real estate and most sales of goods over $500. In general, a contract only needs to contain clear terms, consideration (usually this is the “price” to be paid, although it does not have to be monetary), and be acknowledged by the parties (usually this is a signature).
Businesses often enter agreements without having them reviewed by legal counsel. The agreement may be simple and easy to understand, or the business may want to avoid additional expense. However, problems usually do not arise from something in the agreement, but from something that is unclear or missing from the agreement. Part of the value of legal counsel is their obligation to view the agreement from their client’s perspective, ascertain their client’s expectations, and to advise their client on how to protect the client’s interests. Other parties to the agreement do not have this obligation. Also, the optimism and excitement surrounding the conclusion of a potential deal can affect a business owner’s objectivity about risks. Lawyers approach these risks with a level of pragmatism that is not always fully appreciated by clients in the short term. This might make lawyers lousy company in social settings, but it can useful in business settings. Cost is always a factor, but many agreement reviews only take a couple of hours and a few hundred dollars. The cost of legal disputes and lawsuits are often measured in the tens – or even hundreds – of thousands of dollars.
Review of agreements by counsel is not always possible or practical. Some contracts, known as “contracts of adhesion” are non-negotiable. Cell phone providers and cable companies (and just about anybody who has something that you really need) like to use these. A good rule of thumb is that the smaller the size of the print, the less likely you will be able to do anything about it. Although these types of agreements may not be modified, they are not always completely enforceable.
No written agreement can prevent every possible dispute. If a dispute over a contract (written or unwritten) arises, the resolution should be – you guessed it – in writing. Settlement agreements bring finality to disputes, and create enforceable rights that may have previously been uncertain.
While it is difficult to make blanket statements about legal issues because every situation is unique and every rule has exceptions, and exceptions to the exceptions, it is pretty safe to say, “Get it in writing.” FBN
By Matt Mansfield